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Asian crisis boosts coffee market

Newspapers ran scare stories that coffee prices would soar as the havoc wreaked by Hurricane Mitch came at possibly the worst time for the coffee crop.

Coffee is the drink of the 1990s. The bitter brew was first made fashionable by speciality coffee bars in Seattle, America's "Espresso capital".

Their tiny corner shops prepared dozens of variations of high quality coffee.

The fad soon spread across the United States, then London and could be set to conquer the rest of the world.

Scare over

Asia's economic crisis has helped to soften the impact of Hurricane Mitch.

The region's young and rich middle classes, who only recently acquired a taste for coffee, have fallen on hard times. To them, coffee is now a luxury and therefore demand has slumped.

Despite the hurricane, the price of a Latte is not about to increase. Tim Shaw, coffee buyer for Safeway in London says consumers need not worry: "The market is healthy at the moment, and the coffee prices are quite low."

The crucial period for coffee buyers is from June to mid-August. This is the time when the world's largest coffee-producing country, Brazil, occasionally experiences frosts which can devastate the whole harvest. This year Brazil's crop was not affected.

The Association of Coffee Producing Countries (ACPC) estimates that world production for the current year (July 1998 to June 1999) will be about 6.36m tons, up from 5.73m tons last year.

Low prices hit farmers

For coffee producers in Honduras and Nicaragua, Hurricane Mitch had a terrible impact.

Crop losses of up to 50% in Honduras and 25% in Nicaragua, however, did not effect the coffee market, says Mr. Shaw: "Mitch has no impact on the New York C-index, which is the main future market for Arabica-coffee."

Julia Powell from Fairtrade said: "In terms of quantity, Mitch had no effect on the global coffee market, although it had a dramatic impact on the farmers". Her organisation buys coffee directly from small farmer co-operatives.

The floods destroyed the crop, but also great parts of the infrastructure on which the coffee economy depends. Transporting the crop to the ports for export will be almost impossible.

Mitch hits specialists

Every coffee roaster has its own sources. The UK's top coffee supplier, for example, is Vietnam which supplies 21% of the country's non-decaffeinated coffee.

Vietnam is followed by Colombia (12%) and Indonesia (10%).

Only traders who specialise in buying from Central America will be hit by Mitch, argues Safeway's Tim Shaw.

Coffee drinkers in the West may relax and enjoy their cappuccino, but small coffee farmers suffer.

When world prices fall, their incomes plummet and they are in no position to object, according to the International Coffee Organisation (ICO).

The price has dropped dramatically. On the Coffee, Sugar and Cocoa Exchange in New York, the world's biggest coffee market, the avergae November price for Arabica-coffee was $1.13 per lb ( 0.45 kg) compared with $1.75 at the beginning of 1998 and a peak of $2.64 in May 1997.

However, making a forecast for next year's coffee price, is too early, says coffee expert Tim Shaw.

While in Central America the victims of Hurricane Mitch reconstruct their roads, coffee drinking people in the Northern hemisphere can still enjoy their sweet cappuccino.

Relevant Stories

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Internet Links

International Coffee Organisation
Association for Coffee Producing Countries
Fairtrade

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